Energy costs are focus of meeting

September 15, 2005|by DANIEL J. SERNOVITZ

Electricity costs at Volvo Group's Hagerstown powertrain plant, which produces powertrains for Mack and Volvo heavy-duty trucks, climbed considerably starting Jan. 1, 2005.

But not to the degree they were going to, and only because the company was ready, a plant official said Wednesday.

"Our electricity costs nearly doubled if we hadn't gone out and shopped," said Roger Johnston, vice president and general manager. "Look around, there's some good suppliers out there."


Johnston said the plant is paying about 50 percent more in electricity costs, instead of nearly twice as much, because Volvo was able to find a more competitive electrical supplier.

Allegheny Power's commercial and industrial customers were permitted to shop for more competitive electricity rates at the beginning of the year as a result of Maryland's Electric Customer Choice and Competition Act of 1999. Richard Anderson, president of CQI Associates, said freedom of choice does not mean customers actually will save money in all cases.

"It's not going to go down," consultant Richard Anderson said. "If you're banking that there's going to be signs of improvement in the market ... that's not something I would do at this point."

Anderson and Ed Miller Jr., of Allegheny Power, spoke about Maryland's deregulation program during a breakfast discussion held by the Hagerstown-Washington Chamber of Commerce.

Anderson helped several chamber members reduce their electricity costs last spring as part of an electricity buying consortium assembled by the chamber. Contracting individually through Select Energy, the pilot businesses stood to save between 4 percent and 15 percent in the first year of the contract compared with Allegheny's rates.

As part of deregulation, Allegheny agreed not to increase its rates from 1999 to the end of 2004 to aid in the development of a competitive electricity marketplace. Starting this year, however, Allegheny was free to raise its rates. Based on Allegheny information, the company will have raised the default rates it charges its remaining commercial and industrial customers by an average of 46 percent.

Anderson said businesses need to consider several factors, including their annual electricity costs, and in some cases they might be better staying with Allegheny as their default supplier.

"What you're really trying to do is provide yourself with some long-term stability," he said.

Miller said as the default provider, Allegheny has not sought to discourage its nonresidential customers from seeking more competitive rates.

"Allegheny Power encourages all of our customers to consider all of your options," Miller said. "Default service really is not meant to be competitive."

Starting next year, with large electrical users such as Volvo, Miller said Allegheny could move from default supply rates to more expensive market-based rates.

Lance Nigh, president of the Utility Workers Union of America's Local 102S, questioned whether customers are better served under deregulation.

"Wouldn't it be better to go back to regulated industry?" he asked.

"If we were in a regulated market right now, I believe we would be paying higher rates in Maryland," Anderson said.

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